As we enter 2013, a number of signs – including the strong finish to 2012, macroeconomic factors that appear to be reducing business uncertainty, and intensifying competition in many critical sectors – provide cause for optimism that the breadth and depth of M&A activity will be significantly greater in the coming year than in 2012. Global M&A activity dropped 17.4% in the first three quarters of 2012 compared to the comparable period of 2011, reflecting the European sovereign debt crisis, political uncertainty in the United States and slower economic growth in China and India. But M&A activity turned sharply upward in the fourth quarter: Global announced deal volume for the quarter was the highest in four years, and a number of transformative transactions were announced, including Freeport McMoRan Copper & Gold’s $9 billion acquisitions of Plains Exploration Company and McMoRan Exploration, and ICE’s $8.2 billion acquisition of NYSE Euronext.
Posts Tagged ‘Gordon Moodie’
As discussed in our memos of March 16, 2010 and May 13, 2010, RiskMetrics has recently released the guidelines for calculations under its Governance Risk Indicator (GRId) rating system. The GRId instructions include over 50 pages of compensation questions, the answers to which result in a stand-alone Compensation GRId rating.
The Compensation GRId questions and scoring generally reflect the substantive positions in RiskMetrics’ corporate governance policies and proxy voting guidelines, but in some cases are more punitive. For example, the proxy voting guidelines penalize excise tax gross-ups only in new or materially amended agreements, but the Compensation GRId deducts even for existing agreements with gross-ups. More significantly, the rigid scoring system by its nature codifies the level of emphasis on particular issues. While we do not think the one-size-fits-all GRId approach provides a useful picture of governance practices, most public companies will, given the prominence of RiskMetrics, find it useful to familiarize themselves with the GRId guidelines and identify areas where points can be scored with little risk of substantive harm. For example, in a number of cases addressing an issue in the annual proxy statement may increase a company’s score.
As we described in a prior memo, RiskMetrics has replaced its Corporate Governance Quotient (CGQ) with Governance Risk Indicators (GRIds). Using the new GRIds methodology, RiskMetrics will identify the level of concern (low, medium and high) for each company across four categories of corporate governance metrics used by RiskMetrics: Board Structure, Compensation, Audit and Shareholder Rights. Unlike CGQ, the GRIds metrics are both transparent – anyone can calculate a company’s scores by answering specified questions about its governance structure – and absolute – the scores are company-specific and do not depend upon practices of other companies. One of the GRIds metrics, called “Shareholder Rights,” seeks to measure corporate takeover defenses.
In the first federal judicial decision addressing the requisite proof of share ownership for submission of proposals under Rule 14a-8, a U.S. District Court has upheld, on narrow grounds, a company’s exclusion of a shareholder proposal for failing to comply strictly with the proxy rules. Apache Corporation v. Chevedden, C.A. H-10-0076 (March 10, 2010).
The case involved a precatory shareholder proposal from activist John Chevedden to eliminate supermajority voting. To prove his eligibility to submit the proposal under the proxy rules (which require continuous ownership for one year of just $2,000 in market value of a company’s voting securities), Chevedden provided a letter from Ram Trust Services (RTS), his “introducing broker”. Apache rejected this as deficient because RTS was not a record holder of its stock and gave Chevedden the requisite 14 days to provide proper proof of ownership. Chevedden later – more than 14 days after the deficiency notice – gave Apache a letter from Northern Trust, RTS’ custodian participant in the Depository Trust Company (DTC), the registered holder of the shares in question. Apache asserted that it could exclude Chevedden’s proposal because neither RTS nor Northern Trust was a record holder. Rather than seeking a “no action” letter from the SEC staff, Apache filed suit seeking a declaratory judgment that only a letter from DTC, the actual registered holder, would suffice.